Hello,
This is my first post on here and I hope I'm not violating any rules. I'm having an issue with a Becker Question for BEC and I'm hoping someone can shed some light on it. This question comes from B-5.
CPA - 04261. The answer explanation states that $20,000 of allocated fixed costs are irrelevant. Why? If you are absorbing $120,000 of additional fixed costs with the development of a new product and are planning to absorb the $20,000 of costs currently absorbed by other products, why is this $20,000 not figured into the break-even analysis? It was explained to me that the $20,000 is considered a sunk cost. However, if this cost is going to be allocated to the new product, why would it not be considered when trying to recoup costs?
Thank you in advance for any help you can give. Am I allowed to post a screenshot of the actual problem?